Whether you're a tradie, a café owner, or freelancing from your spare bedroom, running your own business comes with plenty of rewards, and also many responsibilities. If there’s one area where many small business owners go off track, it is in blurring the line between personal and business spending.
Spoiler alert: buying a new BBQ for your backyard doesn't become a business expense just because you once grilled sausages for a team meeting.
Why Keeping Things Separate Matters
Keeping your personal and business expenses in separate lanes isn’t just about neatness – it will make things so much easier all round. When everything is mixed together, it becomes nearly impossible to tell whether your business is thriving or just coasting along on your personal income.
For starters, it keeps your accountant and the IRD happy, which is reason enough for most of us. But beyond tax compliance, it makes your life a lot easier when it comes to:
· Understanding your cash flow (you’ll know if your business is actually making money, or just funding your caffeine addiction),
· Applying for business loans (banks don’t love mystery transactions), and
· Preparing for tax time (your accountant will thank you, possibly even with chocolate).
It’s not just about compliance - it’s about clarity, credibility, and control.
Practical Tips to Separating your Expenses
1. Open a Business Bank Account (Or multiple for those Profit First followers)
Get a separate bank account just for your business and pay all business expenses from it. This helps keep your business transactions clean and your personal splurges private.
2. Keep Your Records Like a Pro
Whether you go digital or old-school with a filing cabinet, best practice is to keep all receipts, invoices, and business-related documents. It may seem like overkill now, but should you be audited, past-you will be very grateful.
3. Reimburse Yourself—Properly
Sometimes you’ll need to use personal money for a business purchase. That’s fine—just make sure you record it clearly and reimburse yourself from the business account. A quick note and a digital receipt go a long way in keeping the books above board.
If you need to withdraw a set amount each week for living expenses, set up a recurring automatic payment to your personal bank account, and only spend from there.
Treat Your Finances Like a Toolbox
Imagine your finances are tools. Your business tools live in one well-organised toolbox, ready to build, fix, and grow. Your personal tools? Different box, different purpose. Mixing them up is like grabbing a spanner to stir your coffee or using a screwdriver to butter toast. It might work in the moment, but it’s messy, confusing, and you’re bound to lose something important.
The Clean Books, Clear Mind Approach:
When your finances are organised, everything else in your business runs smoother. Separation isn’t just smart accounting - it’s peace of mind in spreadsheet form.
